Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 26,000 units from an outside supplier for $16 per unit. Polk is currently operating at less than its full capacity of 580,000 units and has variable costs of $8 per unit. The full cost to manufacture the unit is $11. Polk currently sells 460,000 units at a selling price of $19 per unit. a. What will be the effect on Avery Company's operating profit if the transfer is made internally?
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![Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is
purchasing 26,000 units from an outside supplier for $16 per unit. Polk is currently operating at less than its fll capacity of 580,000
units and has variable costs of $8 per unit. The full cost to manufacture the unit is $11. Polk currently sells 460,000 units at a selling
price of $19 per unit.
a. What will be the effect on Avery Company's operating profit if the transfer is made internally?
b. What is the minimum transfer price from Polk's perspective?
Minimum Transfer Price](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6a01fc01-19a7-4c0b-8b4e-34a19f66b698%2F4fe3a942-2268-4b10-b0d2-2e945d34f092%2Fcv9mzh_processed.jpeg&w=3840&q=75)
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- Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?Swan Company has two divisions, Hill and Paradise. Hill produces a unit that Paradise could use in its production. Paradise currently is purchasing 5,600 units from an outside supPplier for $62. Hill is operating at less than full capacity and has variable costs of $36.80 per unit. The full cost to manufacture the unit is $49.40. Hill currently sells 450,600 units at a selling price of $67.60. How much will Paradise save by not purchasing from outside if a transfer price of $48 is agreed upon? Multiple Choice $78,400 $56,600 $7,600 more cost $28,600Washington Company has two divisions, Jefferson and Adams. Jefferson produces an item that Adams could use in its production. Adams currently is purchasing 100,000 units from an outside supplier for $78.40 per unit. Jefferson is currently operating at full capacity of 900,000 units and has variable costs of $46.40 per unit. The full cost to manufacture the unit is $59.20. Jefferson currently sells 900,000 units at a selling price of $86.40 per unit. Required: 1. What will be the effect on Washington Company's operating profit if the transfer is made internally? 2. What will be the change in profits for Jefferson if the transfer price is $67.20 per unit? 3. What will be the change in profits for Adams if the transfer price is $67.20 per unit?
- Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 530,000 components at a variable cost of $6.00 and a full cost of $9.00. Iron Products has outside sales of 485,000 components at a price of $12.50 per unit. Austin currently purchases 55,000 units from an outside supplier at a price of $11.50 per unit. Assume that Austin desires to use a single supplier for its component.a. What will be the effect on Rapid Industries’ operating profit if the transfer is made internally? Assume the 55,000 units Austin needs are either purchased 100% internally or 100% externally. b. What is the minimum transfer price? (Round your answer to 2 decimal places.) c. What is the maximum transfer price? (Round your answer to 2 decimal places.)Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 505,000 components at a variable cost of $5.50 and a full cost of $9.00. Iron Products has outside sales of 460,000 components at a price of $13.50 per unit. Austin currently purchases 55,000 units from an outside supplier at a price of $11.50 per unit. Assume that Austin desires to use a single supplier for its component. a. What will be the effect on Rapid Industries operating profit if the transfer is made internally? Assume the 55,000 units Austin needs are either purchased 100% internally or 100% externally b. What is the minimum transfer price? (Round your answer to 2 decimal places.) Minimum Transfer Price c. What is the maximum transfer price? (Round your answer to 2 decimal places.) Maximum Transfer Price 47c. What is the maximum transfer price? (Round your answer to 2 decimal places.) Maximum Transfer Price
- SEved Spring Corp. has two divisions, Daffodil and Tulip. Daffodil produces a gadget that Tulip could use in its production. Tulip currently purchases 170,000 gadgets for $13.90 on the open market. Daffodil's variable costs are $7 per widget while the full cost is $11.45. Daffodil sells gadgets for $14.40 each. If Daffodil is operating at capacity, what would be the minimum transfer price Daffodil would accept for an internal transfer? Multinic Choice $7.40 $1.45 $13.90 $14.40SE Spring Corp. has two divisions, Daffodil and Tulip. Daffodil produces a gadget that Tulip could use in its production. Tulip currently purchases 195,000 gadgets for $14.40 on the open market. Daffodil's variable costs are $7.90 per widget while the full cost is $12.20. Daffodil sells gadgets for $15 each. If Daffodil is operating at capacity, what would be the maximum transfer price Tulip would pay internally? Multiple Choice $7.90 $12.20 $14.40 $14.90Spartac Corp has two divisions: Yekaterinburg Division and Sochi Division. The Yekaterinburg Division is currently selling MK-19 products to giant cookie dough millers for USD 3,100 per unit. The variable costs for producing the MK-I9 product are USD 2,000; while demand for this product currently exceeds the production capacity of the Yekaterinburg Division. Apart from this situation, Spartac Corp is considering other uses of MK products. 19, namely as a component of the MBC-67 Blender / Chopper Machine which will be produced by the Sochi Division. The MBC-67 Blender / Chopper machine has a selling price of USD 5,600 and requires additional variable production costs of USD 2,680. The transfer price between the two divisions has been set at USD 3,000. The management of Spartac Corp hopes to start producing and marketing MBC-67 products. However, production cannot run if the transfer of MK-19 products from the Yekaterinburg Division to the Sochi Division does not occur, given the high…
- Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 495,000 components at a variable cost of $6.50 and a full cost of $9.50. Iron Products has outside sales of 446,000 components at a price of $13.50 per unit. Austin currently purchases 55,000 units from an outside supplier at a price of $11.00 per unit. Assume that Austin desires to use a single supplier for its component. Required: a. What will be the effect on Rapid Industries' operating profit if the transfer is made internally? Assume the 55.000 units Austin needs are either purchased 100% internally or 100% externally. b. What is the minimum transfer price? c. What is the maximum transfer price? Complete this question by entering your answers in the tabs below. Required A Required B Required C What will be the effect on Rapid Industries' operating profit if the transfer…Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Activity Cost Inspecting components (sampling only) $480,000 Reworking products (due to failed component) 8,070,000 Warranty work (due to failed component) 11,070,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours* 80 3,920 Rework hours 360…Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Activity Cost Inspecting components (sampling only) $875,000 Reworking products (due to failed component) 6,920,000 Warranty work (due to failed component) 9,170,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours* 80 3,920 Rework hours 360 5,640…